Tuesday 23 June 2009

Shipbuilding industry may see pick-up in orders


The mainland shipbuilding industry, hit by the global financial downturn, may be about to show some tentative signs of recovery.

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Guanyu said...

Shipbuilding industry may see pick-up in orders

Toh Han Shih
23 June 2009

The mainland shipbuilding industry, hit by the global financial downturn, may be about to show some tentative signs of recovery.

Some analysts are guardedly optimistic there will be a rebound at shipyards before the end of the year, despite an order book that has remained skimpy over the past five months.

The industry, the world’s second-biggest after South Korea’s, is likely to receive a boost from a stimulus package announced by Beijing and the improvements seen in some parts of the global economy.

New orders for Chinese shipbuilders fell 96 per cent to 1.18 million deadweight tonnes in the first five months of the year, according to the website of the Ministry of Industry and Information Technology.

Shipbuilders had 192.28 million dwt of orders on hand at the end of last month, 6 per cent less than at the beginning of the year.

“New orders were scanty,” said the ministry. New orders fell 95 per cent to 990,000 dwt in the first four months of the year and dropped 94 per cent to 790,000 dwt in the first quarter, it said. Mainland shipyards completed 2.62 million dwt of new ships last month, 17.6 per cent less than in April.

Despite the gloomy figures, some industry experts expected an improvement in the order books.

“We may see some orders for large ships for Chinese shipyards before the end of the year,” said Russell Barling, Asia corporate communications manager at Lloyd’s Register, the world’s No 2 ship classification society by order book.

Stimulus measures for the industry announced by Beijing in the past few months and optimism that the global recession might be bottoming out were key reasons for the more optimistic outlook, Mr. Barling said.

“There are now inquiries going to Chinese shipyards for larger ships. There haven’t been many inquiries for larger ships for a long time, but now we’re seeing them within the past month,” he added.

The measures include facilitating bank credit for shipbuilding.

Charles de Trenck, an analyst with consultancy Transport Trackers, said the mainland might see a recovery in shipbuilding orders later this year if oil-producing such as Iran placed orders for tankers. But he said there also were risks of a further correction in the industry.

For example, if the Baltic Dry Index, a broad indicator of freight rates, dropped further, there would be few new shipbuilding orders.

Although the market for second-hand ships had rebounded 20 to 30 per cent in the past two months after falling 70 per cent from the peak last year, it had not recovered enough to justify ship owners ordering new ships instead of buying second-hand ones, Mr. de Trenck added.

Because ship values had fallen substantially as a result of the global economic crisis, finance providers might ask owners for more security or claim ship owners were in technical default and seize their ships.